Greenback Propelled by Expectations the Federal Reserve Will Increase Rates

Investors snapped up dollars, pushing the greenback to its highest level against major currencies since September 2003, as they ramped up bets the U.S. economy will pull ahead of the rest of the world this year, with the Federal Reserve in the driver’s seat.

But as the value of the dollar rises against the currencies of some of the country’s biggest trading partners, so do the risks to America’s manufacturing and tourism sectors and to broader financial markets, economists and industry officials say. Another worry: The dollar’s...